Posted on May 15, 2019 by Stuart Simington and 4

Negligent misstatement by statutory authorities – duty of care and special statutory power

The existence of a duty of care in negligence for a misstatement by a statutory authority was recently considered in Loulach Developments Pty Ltd v Roads and Maritime Services [2019] NSWSC 438, by the NSW Supreme Court.

In doing so, the Court considered whether the statutory authority was exercising a ‘special statutory power’ when it made one of the misstatements and could rely on the protections in s43A of the Civil Liability Act 2002 (‘CLA‘).

This blog considers these aspects of the decision and is a timely reminder of the potential implications for statutory authorities if they negligently provide incorrect information to third parties.

RTA makes representations regarding a road widening proposal

The case involved 2 representations made by the Roads and Traffic Authority (‘RTA‘) that a road widening proposal affected part of the land (‘Lot 12‘) owned by Loulach Developments Pty Ltd (‘the Developer‘). The effect of the road widening proposal was to limit the development potential of that land. At the time of the representations, Lot 12 was zoned for use as a road.

The first representation (‘Rep 1‘) was made by the RTA  in 2008 in response to a request by an agent of the Developer for information regarding the timing of the proposed road widening which affected Lot 12. Rep 1 was found to be misleading as at the time it was made there was no road widening proposal which applied to Lot 12.

The second representation (‘Rep 2‘) was made by the RTA to the Council in 2009 in response to a request made to the RTA for submissions by Parramatta City Council. The request for submissions related to  a development application lodged by the Developer for a combined commercial/residential flat building development proposed to be constructed wholly on Lot 11 (another lot owned by the Developer adjacent to Lot 12).

• Lot 11 was not the subject of the road widening proposal which was said to affect Lot 12.
• However in Rep 2, the RTA again gave the impression that Lot 12 remained the subject of the road widening proposal when in fact that was  not the case.

The Developer argued that if the RTA had not made Rep 1 and Rep 2, in breach of its alleged duty of care, the Developer would have sought to rezone Lot 12 to maximise its development potential for residential and commercial development. Assuming that such rezoning was approved, it would then have pursued a different development (across both Lot 11 and Lot 12) compared to that actually pursued, wholly within Lot 11.

The Developer claimed this hypothetical “desired development” would have been approximately $5 million more profitable than the development which it built and sought damages in this amount for the pure economic loss caused by the RTA’s representations.

Duty of care – Rep 1

In order for the Court to be satisfied that Rep 1 amounted to a negligent misstatement, it first needed to be established that the RTA owed the Developer a duty of care.

The Court found that in making Rep 1 the RTA was under a duty to take reasonable care in responding to the request for information made by the Developer’s agent. 

The Court endorsed a previous High Court decision in which that Court had held that a special relationship was required in order for a duty of care to arise in relation to a negligent misstatement. Such a special relationship required:

• the maker of the representation to realise that the recipient intended to act on the information or advice being provided; and
• it was reasonable in the circumstances for the recipient to rely on that information or advice.

This was a clear case in which there was both reliance and an assumption of responsibility. In making Rep 1, the RTA undertook to respond to the request for information from the Developer’s agent and it was clear on the face of the request for information (“owner wants to develop site, need to know time factor for road widening”) that the Developer intended to rely on the information provided.

The Court determined that although the request for information related to the timing of the road widening proposal, the scope of the duty assumed by the RTA when it made Rep 1 was to take reasonable care in relation to the provision of the information and advice in the letter, including as to the existence of a road widening proposal.

The RTA was also held to have breached this duty of care but the Developer’s claim in respect of this representation ultimately failed as the Court found it had been commenced out of time.

Duty of care – Rep 2

The Court then considered whether a novel tortious duty of care existed in relation to Rep 2. In doing so, it said that the most significant factors to be considered in order to determine whether such a duty of care should be imposed were:

• assumption of responsibility;
• reliance;
• vulnerability; and
• inconsistency with the statutory regime.

(see Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649 at [103] regarding the non-exhaustive list of “salient features” to be considered when evaluating whether to impose a novel duty of care and identifying its scope and content).

Having regard to the above, the Court found that a novel duty of care should not be imposed in respect of Rep 2, because:

• the representation was not made to the Developer or its agent in response to a request by them; rather it was made to the Council as part of its assessment of the Developer’s development application;
• as the Developer did not seek and might (at least in theory) never learn of the RTA’s submission, it was difficult to see that there was  sufficient reliance to generate a duty of care;
• the Developer was not especially vulnerable. The outcome of the development application was entirely in the hands of the Council (this was so even though the information about whether there was a road widening proposal was peculiarly within the knowledge of the RTA); and
• there was inconsistency, or at least tension with the statutory regime relating to the development application.
  • The Council was obliged by cl 104 of the State Environmental Planning Policy (Infrastructure) 2007 (‘ISEPP‘) to give prompt notice of the development application to the RTA as the proposed development was “traffic-generating development”.
  • The Council could not determine the development application until 21 days after it had provided this notice and was obliged to take into account any submission made by the RTA.
  • The tension arose because the purpose of the ISEPP was to enable the RTA to provide submissions in relation to the proposed development conducive to safety and efficient traffic management. Such submissions were likely to be at odds with the economic interests of a profit-seeking developer.
  • The Court said at [70] that “it is difficult to see how the common law would impose a duty upon the RTA to take reasonable care lest its suggestions expose Loulach to expense, where the statutory regime invited the RTA to employ its expertise to provide advice as to the safety and efficiency of the built structure, and its impact on traffic during the construction phase.“

Section 43A of the CLA – Rep 2

Although the Court ultimately found that no duty of care existed in respect of Rep 2, during the course of the hearing RTA sought to rely on  s43A of the CLA in respect of Rep 2 and claimed that in making Rep 2 it was exercising a ‘special statutory power’. The power exercised was said to be the power under s52A of the Transport Administration Act 1988 to make recommendations in relation to traffic safety and parking of vehicles, the exercise of which was triggered by a notice provided for in another statutory instrument – clause 104(3) of ISEPP.

If s43A of the CLA applied, it would have protected the RTA from liability in negligence unless in making Rep 2, RTA was found to have acted so unreasonably that no authority with the ‘special statutory power’ to make Rep 2, could properly consider the making of Rep 2 to be a reasonable exercise of its power.

However, in order for s43A of the CLA to apply, the Court had to be satisfied that the RTA was exercising a ‘special statutory power’. This is defined in s43A(2) of the CLA as follows:

“(2)   A special statutory power is a power:

(a)   that is conferred by or under a statute, and

(b)   that is of a kind that persons generally are not authorised to exercise without specific statutory authority.”

The Court found that Rep 2 was not the exercise of a ‘special statutory power’ to which s43A of the CLA applied because:

• The RTA made Rep 2 in the context of providing a submission to the council, albeit one in accordance with the notice provided to it pursuant to the ISEPP.
• The source of power to write the letter was not s52A of the Transport Administration Act 1988 as that section did not purport to confer a power (something whose exercise would affect the rights of another).
• And there is a distinction to be drawn between activities which are reliant for their lawfulness on a statutory power and those which can already be undertaken in accordance with the general law. The RTA’s letter to the council was the exercise of exactly the same right that others could exercise in relation to the Developer’s development application. It was not something that persons generally are not authorised to exercise without specific statutory authority.

Lessons to be learned

Although the RTA was ultimately held not to be liable for the Developer’s losses in this case, it is nevertheless an important reminder that before providing information to third parties, statutory authorities should carefully consider the accuracy of the information they propose to provide.

This is particularly so in circumstances where they will assume responsibility to that third party in respect of the information being provided and they are aware that the third party intends to rely upon it.

Failure to ensure that such information is accurate may result in findings of negligence against statutory authorities should the reliance on that information be found to have caused loss to the recipient of the information.

Statutory authorities should not assume that the protections in s43A of the CLA will be available in all circumstances because, as this case makes it clear, these protections can only be relied upon where the information is provided pursuant to a ‘special statutory power’.

The full judgment can be read here.